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Is Credit Card Interest Rising While Other Rates Stay Low?

Sadly.  Interest rates for mortgage loans, car loans, and pretty much everything are at all-time lows except for credit cards. Credit card interest rates are actually rising over time and quickly. In fact, since January 2013, the average credit card interest rate has risen from 14.56% to 15.31%.

http://www.foxbusiness.com/personal-finance/2013/09/16/why-arent-credit-card-aprs-at-all-time-lows/

This rise in credit card interest rates is due to a few factors.  First, the banks will say that credit card debt in general is unsecured debt. In the event of nonpayment the bank cannot foreclose a home or repossess a car for credit card debt.  Therefore credit cards will always have a higher interest rate (but no explanation for why it is 3X more than secured rates, of course), but that is not the whole story.

Consumer lending legislation meant to protect the consumer has actually provoked the banks to find new sources of income.  For instance, the CARD Act of 2009 placed caps on credit card penalty fees, prevented credit card interest rate hikes in the first year of holding the card. It also eliminated some other fees the bank used to charge. Hence, the banks have responded by raising interest rates to continue their substantial credit card profits. Finally, consumers have helped credit card interest rates rise by simply applying for and excepting these cards at higher rates. Supply and demand has dictated the credit card issuers can get away with raising interest rates and therefore they do.

Perhaps the simplest explanation for the increasing interest rates is the best: the banks charge higher rates because they can.  The borrowers have no option other than to keep the balance open.  Who borrows money at 18% unless they have no other option?

If you are in credit card debt and interest rates are making repayment in full impossible, contact a qualified debt settlement attorney. Many consumers are stuck in a never ending cycle of making minimum payments each month at high interest rates.  Break the cycle. A qualified debt settlement attorney can likely negotiate payoff of credit card debt for large reductions in the principal balance.

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Kevin Fallon McCarthy is the McCarthy Law PLC’s managing attorney and an experienced Phoenix debt attorney. Mr. McCarthy has also worked as general counsel for a large corporation. He has corporate counsel experience in human resource matters, general corporate governance, and union class action litigation.